Capital Flows to Emerging Markets - The Perspective from the IIF

Transcription

1 Capital Flows to Emerging Markets - The Perspective from the IIF Felix Huefner Global Macroeconomic Analysis Department Institute of International Finance 1 st Meeting of the COMCEC Financial Cooperation Working Group December 12, 213, Ankara

2 IIF Capital Flows In A Nutshell Country Sample Emerging Europe Emerging Asia LatAm Africa/M. East Bulgaria China Argentina Egypt Czech Republic India Brazil Lebanon Hungary Indonesia Chile Morocco Poland Malaysia Colombia Nigeria Romania Philippines Ecuador Saudi Arabia Russia South Korea Mexico South Africa Turkey Thailand Peru UAE Ukraine Venezuela Data in Annual frequency starting in

3 IIF Capital Flows: What and Where? Emerging Market Private Capital Inflows, Net $ billion $ billion 1,4 1,2 1, 8 Commercial Banks Nonbanks Portfolio Equity Direct Equity Investment 1,4 1,2 1, 8 China EM Asia ex. China MENA Latin America 6 6 EM Europe Source: IIF Source: IIF 3

4 Inflows vs. Outflows EM Capital Flows by Residency of Investors $ billion Total Capital Inflows % of GDP, net flows from non-residents 1,5 1, "Private" Resident Outflows Official Reserve Accumulation Non-Resident Inflows 25 2 Emerging Economies 5 Net Flows 15 Mature Economies , 5-1,5-2, Source: IIF Sources: IIF, IMF Balance of Payment Statistics, IMF WEO October 213. Note: Mature = 5 major economies. 4

5 Twenty Years of Thrills and Spills Total Inward Flows, IIF EM 3 percent of World GDP Total, % of World GDP Total, $ Billion (rhs) Tequila Crisis Asia Crisis Argentina Crisis Global Fin. Crisis QE 2 Taper Tantrum $ billion Sources: IIF, IMF Balance of Payments Statistics 5

6 The Past: Push- and Pull Factors Were Supportive Real GDP Growth Rate % y/y % of GDP G3 Central Bank Balance Sheets Mature Economies -4 Emerging Economies Source: IIF, Datastream U.S. Euro Area 5 Japan Source: National Sources, Datastream.

7 Boosting Capital Inflows to EM Emerging Market Private Capital Inflows, Net $ billion 1,4 1,2 1, AFME Latin America EM Europe Equity and Bond Flows into EM Funds Around Fed QE Episodes $ billion; t= are starting dates for QE implementation EM Asia QE1 QE2-1 Operation Twist Operation Twist Extension QE3-15 t-5 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 t+5 Source: IIF Capital Flow Report January 213 Source: IIF

8 Now: EMs Disappoint While MEs Surprise Index, 5=breakeven 6 Manufacturing PMIs 1 IIF GDP Growth Forecasts for 213 forecasts as of Nov PH CN 5 45 Advanced Economies 4 Emerging Economies Source: Bloomberg, Markit Economics, IIF HU Source: IIF AR RO PL RU SA KR ZA BR MX ID CL IN TR TH MY forecasts as of Dec 212 8

9 Capital Flow Retrenchment During the Summer $ billion 4 Net Inflows into EM Funds Current Accounts and Exchange Rates 5 KR CA in % of GDP PL CN RO HU Bond Equity CL ZA TR Fragile Five IN PE MX -5 TH -1 BR ID -15 PH RU MY Unchanged Monetary Policy Stance Monetary Tightening Monetary Easing Source: EPFR -2 FX change between May 23 and September 5 Sources: Datastream, IIF, National Sources. Note: CAB figures reference 212 yearly data. Monetary tightening includes both policy rate hikes and tightening of liquidity conditions. 9

10 Impacting Lending Conditions EM Bank Lending Conditions Index Diffusion index (5=neutral) 6 Funding Conditions Tightened Diffusion index (5=neutral) 7 Credit Standards 55 6 Loan Demand Funding Conditions Jan 1 Jan 11 Jan 12 Jan 13 Source: IIF EM Bank Lending Conditions Survey. Source: IIF EM Bank Lending Conditions Survey. 1

11 Retrenchment Episodes in Perspective EM Equity and Bond Fund Flows Major EMs: Non-Resident Capital Inflows cumulative flows, t= month before retrenchment began $ billion, Major EMs= BRIC, Turkey, Mexico & Indonesia 15 1 t= 5/1/28 t= 8/1/ IIF Forecast 5 t= 4/1/ t-2 t-12 t-4 t t+4 t+12 t+2 Sources: IIF, EPFR -1 25Q1 27Q1 29Q1 211Q1 213Q1 Sources: IIF, IMF Balance of Payment Statistics, SAFE 11

12 EM Differentiation: The Ones That Benefit EM Exposure to G3 Demand Manufacturing exports as % of total exports Asian Exports and G3 PMIs percent, 3m/3m saar 5=breakeven 1 China 4 Asia Exports 6 Philippines South Korea 3 G3 Manufacturing PMI 5 India Turkey Mexico Thailand Malaysia South Africa Poland Indonesia 5 Chile Russia Exports to G3 as % of total exports Source: WTO Source: Datastream, IIF. Note: Asia exports is a weighted avg. of Korea and Singapore. PMI is weighted average of U.S., Euro Area and Japan.

13 EM Portfolio Inflows Should Persist percentage points Global GDP Growth Emerging Markets Mature Economies f percent of world GDP Total Capital Inflows to EMs f Source: IIF Capital Flows Report October 213 Source: IIF Capital Flows Report October 213

14 EM Portfolio Inflows Should Persist Cumulative Equity/Bond Flows into EM Funds $ billion, trend estimated with HP filter, EPFR data Financial Globalization and Deepening (22-212) total financial assets in % of GDP Bonds Equities Equity Trend Bond Trend Brazil China India Russia Euro Area United States Japan (foreign assets + foreign liabilities) / GDP Source: IIF Capital Flows Report October 213 Source: IIF Capital Flows Report October 213

15 Thank You See our reports on Capital Flows to Emerging Market Economies, Oct. 213 Structural Challenges to EM Growth, October 213 EM Bank Lending Conditions Survey, October